At 37signals we sell our web-based products using the monthly subscription model. We also give people a 30-day free trial up front before we bill them for their first month.

We think this model works best all the time, but we believe it works especially well in tough times. When times get tough people obviousy look to spend less, but understanding how they spend less has a lot to do with which business models work better than others.

There are lots of business models for software. Here are a few of the most popular:

• Freeware
• Freeware, ad supported
• One-off pay up front, get upgrades free
• One-off pay up front, pay for upgrades
• Subscription (recurring annual)
• Subscription (recurring monthly)

Cutting new before cutting old

Typically people look to cut new spending before they cut current spending. They’ll often put a freeze on anything they aren’t already paying for. Eliminating new costs is easier than eliminating existing costs.

For example, if they’ve been evaluating something new, they’ll put that evaluation on hold. If they’ve been able to get by without it they can likely continue to get by without it. Or if there’s a big upgrading coming up they’ll stall or just consider it unnecessary.

But if they’re already paying for a service they use, they’ll likely continue using that service. They may downgrade to a cheaper plan, or try to negotiate price, but if it’s still useful there’s a fair chance they’ll continue using it.

The problem with one-off selling

The problem with one-off selling is that once the customer pays you once, that revenue stream runs dry. In tough times, when people freeze new spending, less new customers means less new revenue. And in extreme cases, you may see no new customers at all. That means no new revenue at all. So if you have no new customers for three months, you have no new revenue for three months. If you don’t have reserves, going dry for three months could sink you.

Like everyone, I’ve been reading a lot about the troubles at the Big Three automakers. A lot of recovery ideas have been thrown around. Higher fuel standards, new designs, fewer model lines, new management, consolidation, bankruptcy, etc.

While some of these proposed solutions could have a positive impact, I want to talk a bit about something I haven’t heard discussed much: The dealership buying experience.

In the web world there’s a lot of talk about the customer experience. Discussions about usability and profitability and success always seem to swing around and point at the overarching customer experience: How’s it feel to browse, research, and buy something on a site? How’s the experience?

Dealerships

I like cars. Over the past few years I’ve probably been to 15 dealerships. I’ve checked out and tested out a lot of cars: German, Japanese, British, Swedish, and American. I’ve had a lot of customer experiences to think about.

Without exception, I’d put the American car dealerships at the bottom of the customer experience pile. The dealerships have been dirtier, the desks have been messier, the decor has been older. The dealerships themselves feel like used cars. I’ve also found the sales tactics pushier and the salespeople’s interest and knowledge about the cars lacking.

Unrelated but relevant: Have you been into an Audi dealer lately? Beautiful. Modern, airy, clean, welcoming, warm, lots of natural light, light wood floors, lots of room to move around. Go into an Audi dealership sometime then walk over to the local Cadillac dealer.

This has been a hard one to keep to ourselves, but the time is finally right: We’ve signed a deal with a publisher to publish our next book.

The process

Even though we had tremendous success self-publishing Getting Real, we decided that this time we wanted to write a best seller. We want to sell hundreds of thousands or millions of copies. We couldn’t do this on our own, so we decided to work with a traditional publisher.

To help us find the right publisher, and to help us navigate the process, we enlisted an agent. We hired Lisa DiMona on Seth Godin’s kind recommendation. Lisa had the connections that made the meetings that made the deal happen.

With Lisa’s guidance, we wrote a proposal which she distributed to about eight different publishers. Proposals were sent to big New York publishers, small indie publishers, and a couple in between.

We received positive feedback from almost all of them, and received a preemptive offer. We were planning to go to auction with the book in a few weeks, but one of the publishers wanted to make us an offer so we didn’t go to auction. After careful consideration we thought it would be best to go to auction instead of take the preemptive deal. In the end I believe this was the right decision.

Off to New York

A few weeks later David and I were in NYC for the Web 2.0 conference. We set up meetings with six publishers while we were there to meet with the publishers who showed the most interest.

We recently conducted a survey of our Backpack customers. We got some great feedback — including that 97% of our customers would recommend Backpack to a colleague, friend, or family member. Thank you!!

We also included some open ended questions and comment boxes. I recently finished reviewing every response and noticed some suggestions about things that Backpack already offers. I thought I’d pull out some of the more common suggestions and show you where you can find these features in Backpack.

SSL on Solo

A few people mentioned that they didn’t have SSL on their Solo Plan. The Solo plan does include SSL, but it’s possible that it’s turned off. To check, click the Settings link in the top right corner. Then you’ll see this option:

Difficult to upload multiple files (or a folder) at once

A good way to handle multiple file upload (or uploading an entire folder) is to zip or compress the files or folder into a single archive. Then you can upload that single file instead of trying to upload all the separate files separately. Both the Mac and PC have zip/archiving/compression tools that allow you to do this. On the Mac OS X 10.5, for example, you can select multiple files or a folder, right-click, and select “Compress items”. I believe 10.4 said “Archive items”.